The Economic Cost of FAS.

Estimates of the total cost of FAS are highly dependent on factors such as incidence rates for the disorder. Estimates of the lifetime costs involved with a single case of FAS may be more valuable.

S everal studies Sokol 1987, 1991a,b;Harwood and Napolitano 1985;Rice et al. 1990) have presented estimates of the economic cost to the Nation that results from fetal alcohol syndrome (FAS). Be cause of differences in the underlying assumptions employed in producing the estimates, the resulting costs cover a wide range. Much of this variation may be attributed to differences in the incidence rates (i.e., the number of FAS cases per 1,000 live births) on which the estimates are based. Further differences reflect discrepancies in the cost components, which are the specific adverse effects of FAS for which costs are computed, that are included in the studies. Estimates of the total economic cost that results from FAS provide a general idea of the dimen sions of the problem, but they are of little help in designing or evaluating policies to counter the adverse effects of FAS. Esti mates of the lifetime cost associated with a typical FAS case are more useful for such policyrelated applications.

DIFFERENCES AMONG COST ESTIMATES OF FAS
As mentioned above, a key source of dif ferences among estimates of the total cost of FAS is variation in the FAS incidence rates used as the basis for cost calculations. Abel and Sokol (1987) estimated that in 1984, the cost of FAS in the United States was $321 million, based on an average incidence of 1.9 FAS cases per 1,000 live births. This incidence rate was an average drawn from several prospective and retro spective studies. (Prospective studies ex amined births that occurred while the study was in progress. Retrospective studies an alyzed the records of previous births.) In a more recent paper, Abel and Sokol (199lb) produced a much lower cost estimate of $75 million based on an overall incidence rate of 0.33 FAS cases per 1,000 live births. This conservative estimate is derived en tirely from prospective studies, which yield lower estimates of FAS incidence than do retrospective studies, in part because there are no prospective data for American In dians and other racial/ethnic groups that may face elevated risks of FAS. Harwood and Napolitano (1985) gen erated a range of cost estimates using alternative FAS incidence rates of 1.0, 1.67, and 5.0 FAS cases per 1,000 live births. The last rate, which the researchers acknowledged was well above that sug gested by the FAS literature, was provid ed for comparison as an upper boundary that might apply if children born with only some of the defects that constitute FAS were included in the analysis. This range of incidence rates accounted for the wide range of cost estimates reported by Harwood and Napolitano: from $1.95 billion to $9.69 billion.
The large discrepancies in the cost estimates obtained in various studies also are due in part to significant differences in the components of cost included in the calculations. All studies include the cost of care for FAS babies with low birth weight; the costs for surgical correction of FASrelated birth defects such as cleft palate, heart defects, and audiological defects; and the cost of care for those with moderate or severe mental retardation due to FAS. In arriving at their original esti mate of $321 million, Abel and Sokol (1987) also included the cost of semi independent supervised support for mildly retarded FAS patients age 21 and under, a GREGORY BLOSS, M. A., is an economist in the Office of Policy Analysis, National Institute on Alcohol Abuse and Alcoholism, Rockville, Maryland.
cost category that was excluded from their later studies on the grounds that such care was generally required only after age 21 (none of the Abel and Sokol studies in cluded costs beyond age 21). Rice and colleagues (1990) used the same approach and incidence rate as the original Abel and Sokol study but added costs of resi dential care for patients over 21. These costs account for 80 percent of their total estimate of $1.61 billion for 1985; the remaining 20 percent is accounted for by costs incurred through care of people with FASrelated birth defects and mental retardation. Harwood and Napolitano in cluded estimates of the value of productiv ity lost as a result of FASrelated mental retardation as well as the cost of treatment and residential care for patients of all ages with FAS. Table 1 summarizes the cost estimates of the five studies.

LIMITATIONS OF COST ESTIMATES OF FAS
In comparing these cost estimates, it is important to keep in mind two general limitations regarding their use and inter pretation. First, some of the most signifi cant aspects of the total burden of FAS are not measured in any of the studies, namely the pain and suffering (both phys ical and emotional) experienced by victims of FAS and their families. These effects are legitimately considered as costs, be cause people would willingly pay to avoid them. Nevertheless, costofillness studies in general have omitted pain and suffering costs on the grounds that they are too difficult to estimate reliably Hodgson and Meiners 1982).
Second, estimates of the total cost of FAS do not provide reliable guidance as to what policies for prevention and treatment of FAS are appropriate. Any specific FAS prevention or treatment policy must be evaluated on the basis of the costs and benefits associated with the specific poli cy, not the overall cost associated with FAS (Sindelar 1991;Wagstaff 1987). To conduct such evaluations, estimates of the cost associated with a single case of FAS are more helpful than are estimates of the total annual cost of all FAS cases in the Nation. For example, the economic benefit of a prevention policy may be interpreted as the cost that can be avoided by prevent ing FAS births. The benefit of a particular prevention policy can be calculated as the lifetime cost of a single FAS birth multi plied by the number of FAS cases that the policy is expected to prevent. This benefit can be compared with the cost of imple menting the policy to determine whether the policy confers a net benefit, and how the benefits and costs of this policy com pare with the benefits and costs associated with other policy approaches to the prob lem of FAS births.

ESTIMATING LIFETIME COSTS OF FAS
The cost associated with an FAS birth is actually a stream of costs, spread uneven ly over the life of the patient. To permit comparisons between a stream of costs and a onetime cost (such as might be associated with implementing a particular policy measure), analysts compute the present discounted value (PDV) of the stream of costs. In this calculation, costs that are incurred in the distant future are assigned smaller weights (discounted) relative to costs that are incurred nearer to the present. As a result, the PDV of a stream of future costs is less than the sim ple (undiscounted) sum of such costs. The degree to which future costs are discounted is determined by the discount rate selected by the analyst. The PDV of a given stream of costs can be interpreted as the amount of money that would have to be deposited in an interestbearing account today (earning interest at a rate equal to the discount rate) so that the accumulated principal and inter est would exactly defray the given stream of costs. 1 Harwood and Napolitano (1985) have estimated the lifetime cost to age 65 asso ciated with a typical case of FAS for a 1 Note that a higher discount rate produces a lower PDV. Note also that PDV calculations are conceptually distinct from inflation adjustments, although the effects of inflation can be effectively removed from such calculations by appropriate choice of the discount rate. child born in 1980. The total (undiscount ed) lifetime cost was estimated at $596,000 for each case of FAS, of which 68 percent represents direct expenditures necessary for treatment and residential care necessi tated by FAS. The remaining 32 percent represents the value of FASrelated pro ductivity losses. Using a discount rate of 6 percent, the PDV of the lifetime cost of a case of FAS was estimated at $163,000, of which 76 percent represents direct expend itures for treatment and residential care, and the remaining 24 percent represents productivity losses due to FAS. In general, expanding efforts to prevent FAS will produce a net economic gain if the cost of preventing each additional case of FAS is less than the PDV of the lifetime cost of an FAS birth. Given the magnitude of the estimated PDV of the lifetime cost of an FAS case, one may conclude that major prevention efforts may be well jus tified on economic grounds. ■